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The NAIC on Implementation of MLR

Obama administration officials never improperly interfered with the deliberations regarding standards it recommended for implementing the healthcare reform law, the National Association of Insurance Commissioners (NAIC) said in response to a congressional inquiry.

“While there were some instances when HHS officials expressed their interpretations of Congress’ intent, particularly with respect to the definition of ‘federal taxes’ in the Medical Loss Ratio (MLR) calculation, or provided suggestions regarding a starting point for defining ‘activities that improve health care quality,’ at no time did HHS officials state or imply that they would refuse to certify our recommendations if we did not follow their interpretation,” the letter said.

The NAIC response was in the form of a letter to Republican members of the House Energy & Commerce Committee. The letter was dated Jan. 12. More documents from the NAIC are forthcoming, and that the E & C Committee originally asked for a reply by Dec. 19th.

The letter specifically responded to questions as to whether HHS officials dictated the rules the NAIC forwarded to the HHS on the medical loss ratio and certain tax issues related to the healthcare reform law, the Patient Protection and Affordable Care Act (PPACA.)

The information was requested in a letter sent to the NAIC Dec. 7 by Rep. Fred Upton, R-Mich., chairman of the E&C panel; Rep. Joe R. Pitts, R-Pa., chairman of the panel’s Health Subcommittee; and Rep. Cliff Stearns, R-Fla., chairman of panel’s Oversight and Investigations Subcommittee.

The letter was signed by the NAIC executive committee. This included Susan Voss, Iowa commissioner and NAIC president last year.

Upton, Pitts and Stearns sent the letter to Voss, former NAIC president Jane Cline (now in private practice as a lawyer in West Virginia), and Praeger, who works extensively on NAIC health insurance committee work, and heads the NAIC Healthcare Task Force.

Kevin McCarty, the new NAIC president, also signed on to the letter.

The letter was sent after the HHS declined to comply with a petition adopted by the NAIC by a 26-20 vote Nov. 22 requesting that commissions paid to insurance agents be exempt from the MLR. A week later, in a final rule and an interim final rule, the department adopted the MLR rules originally proposed by the NAIC.

On the MLR, the NAIC said in its letter, “As it has done in the past with standards for Medigap insurance coverage, the NAIC developed these recommendations using an open, transparent process,” the letter said.

The letter explained that, “Prior to adoption, all issues were discussed on open conference calls and in-person meetings held by the two working groups of state regulators formed to develop the NAIC’s recommendations.”

Adoption of proposals “only occurred during open conference calls or in-person meetings,” the letter said. “These calls and meetings were attended by hundreds of participants, including state regulators, insurers, agents and brokers, consumer advocates, medical societies, business and employer groups, federal regulators, congressional staff, private citizens, and the media—all of whom were free to listen and speak to the issues at hand,” the letter said.

Moreover, regarding its deliberations pertaining to PPACA recommendations to HHS, the NAIC letter said that its recommendations to the Department of Health and Human Services Committee regarding healthcare law regulations were all based “on open conference calls and in-person meetings held by the two working groups of state regulators formed to develop the NAIC’s recommendations.”

The PPACA requires the NAIC to establish uniform definitions of activities which improve health care quality. These definitions were to serve as the basis for the Act's MLR requirements. Beginning in 2011, insurance companies have been required to comply with new MLR requirements that mandate at least $0.80 of every health insurance premium dollar goes towards the cost of actual medical care, leaving only the remaining $0.20 to cover administrative costs--where insurers derive any profit.

The MLR has been a deeply contentious issue, with insurance industry advocates noting that it could lead to carriers cutting commissions paid to agents in order to make up the difference for constrained profit margins. National Underwriter has received numerous letters and comments from health agents themselves stating that the MLR alone could force many of their practices to close.